§ 50.3     Strong-Arm Powers, Statutory Liens, Preferences and Fraudulent Conveyances
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 50.3, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Litigation by Chapter 13 debtors to recover preferences or fraudulent conveyances or to assert the strong-arm powers is relatively uncommon. Consumer debtors are rarely able to make significant avoidable transfers on the eve of a Chapter 13 filing. Voluntary prepetition transfers that might be recovered as preferences or fraudulent conveyances typically aren’t recovered by the debtor who made the transfers in the first instance. Rather than avoid such transfers, the debtor will include the value that could be recovered in the amount paid to unsecured creditors through the plan.1

[2]

Except to protect an exemption, the Code does not specifically authorize Chapter 13 debtors to assert the strong-arm powers in § 544, to avoid statutory liens under § 545, to recover preferences under § 547 or to avoid fraudulent conveyances under § 548. Chapter 5 of the Code is applicable in Chapter 13 cases,2 but as discussed above with respect to turnover under § 542,3 the avoidance and recovery powers in Chapter 5 are worded in terms of an action “by the trustee.”4 And the Supreme Court has admonished that when the bankruptcy court says “the trustee” can take some action, it means only the trustee can take that action—at least with respect to some of the powers of a trustee under Chapter 5 of the Bankruptcy Code.5

[3]

In a Chapter 11 case, 11 U.S.C. § 1107(a) specifically grants to a debtor-in-possession “all the rights, . . . all the functions and duties . . . of a trustee serving in a case under this chapter.” In a Chapter 12 case, 11 U.S.C. § 1203 grants the Chapter 12 debtor most of the powers of a trustee serving in a Chapter 11 case, including the avoidance and recovery powers.6 In contrast, 11 U.S.C. § 1303 grants a Chapter 13 debtor, “exclusive of the trustee, the rights and powers of a trustee under §§ 363(b), 363(d), 363(e), 363(f) and 363(l), of this title.” Elsewhere in Chapter 5 of the Code, 11 U.S.C. § 522(h) provides that “the debtor may avoid a transfer of property of the debtor or recover a setoff to the extent that the debtor could have exempted such property . . . if . . . .” Thus, on the face of the Code, there is no statutory authority for a Chapter 13 debtor to exercise the avoidance or recovery powers in §§ 544, 545, 547 and 548 except to protect an exemption under the circumstances described in § 522(h).

[4]

Sometimes without discussion of § 522(h), the reported cases are in disagreement whether Chapter 13 debtors can assert the strong-arm powers in § 5447 and/or whether Chapter 13 debtors can recover preferential transfers under § 547.8 A great number of reported decisions have allowed Chapter 13 debtors to challenge and sometimes recover fraudulent conveyances under § 548, typically without discussion of the statutory authority to do so.9 The U.S. Court of Appeals for the Seventh Circuit in dicta has suggested that Chapter 13 debtors are without standing to use § 548.10 The scant case law dealing with the use of § 545 by Chapter 13 debtors concludes that a Chapter 13 debtor cannot avoid statutory liens except to the extent that the property is then exempt.11 Several courts have permitted Chapter 13 debtors to recover postpetition transfers under 11 U.S.C. § 549.12 It has been observed that the Chapter 13 debtor is the individual most appropriately stationed to identify avoidable transfers and to seek recovery when consistent with the rehabilitative intent of Chapter 13.13

[5]

A growing number of courts have held that the Chapter 5 avoiding powers are available to a Chapter 13 debtor only to enhance the debtor’s exemptions under § 522(h).14 These courts acknowledge that § 522(h) is a narrow grant of avoidance powers to the debtor. As explained by the Fifth Circuit:

Congress has specifically authorized narrow exceptions to the general rule that Chapter 13 debtors lack standing to exercise the strong-arm powers of Chapter 13 trustees. In section 522(h), Congress granted debtors the authority to exercise section 544 avoidance powers under specific and limited circumstances. . . . Section 522(h) specifically grants debtors standing to avoid certain involuntary transfers of exempt property, such as homesteads, if the trustees have not themselves attempted to avoid the transfers. . . . The Ninth Circuit has identified a five-part test, that generally tracks section 522(h), to determine the power of a debtor to avoid a transfer of exempt property under section 522(h): (1) the transfer was not a voluntary transfer of property by the debtor; (2) the debtor did not conceal the property; (3) the trustee did not attempt to avoid the transfer; (4) the debtor seeks to exercise an avoidance power usually used by the trustee, listed within § 522(h); and (5) the transferred property is of a kind that the debtor would have been able to exempt from the estate if the trustee had avoided the transfer under one of the provisions in § 522(g).15
[6]

As a practical matter, recovery of preferences or fraudulent conveyances by debtors makes little sense in Chapter 13 cases except when the recoverable property will be subject to exemption. If the debtor has been the victim of an involuntary, prepetition transfer that could be avoided, § 522(h) allows the Chapter 13 debtor to recover that transfer and then exempt the transferred property. However, if the Chapter 13 debtor avoids a transfer of property that cannot then be exempted, the estate is enhanced and the best-interests-of-creditors test in § 1325(a)(4) will require the debtor to pay creditors at least the value of the recovered property.16

[7]

Recovering a prepetition, cash payment to a creditor could give the debtor some money to work with early in the Chapter 13 case. For example, if the debtor is in arrears on a home mortgage and could recover a preference from an unsecured creditor, that money might then be used to cure the default on the home mortgage. Because of the relatively modest economics of most Chapter 13 debtors, there are rarely any significant prepetition transfers of cash that might be recovered to the debtor’s advantage. The “$600 defense” to preference recovery in § 547(c)(8)17 is a problem in Chapter 13 cases because involuntary transfers of cash from debtors by garnishment and the like are typically less than $600 each. Recent § 547 cases aggregate prepetition cash transfers to a single creditor for purposes of the defense in § 547(c)(8).18 Preference recovery becomes a more realistic option for Chapter 13 debtors whose wages were attached before the petition if the $600 defense can be defeated by aggregation of several smaller levies.19

[8]

The Chapter 13 trustee can exercise avoidance and recovery powers,20 but the trustee has limited incentive to do so. The value of any recoverable property or avoidable transfer identified by the trustee must be paid to creditors, but the debtor can neutralize the need for actual litigation by proposing to pay more than the value of any possible recovery over the life of the plan.21 Any recovery by the trustee becomes property of the estate, and except as provided in the plan or order of confirmation, recovered property can be used by the Chapter 13 debtor. Arguably, money recovered by the debtor or by the Chapter 13 trustee constitutes disposable income that the debtor must commit to the plan.22 Rarely is a prepetition transfer large enough to offer any significant funding for the Chapter 13 plan.

[9]

The bankruptcy courts have been reluctant to allow Chapter 13 debtors to use recovery or avoidance powers to advantage only the debtor. Several courts have stated that the trustee’s avoiding and recovery powers are available to a Chapter 13 debtor only when use of those powers will benefit creditors. These cases sometimes fail to acknowledge that § 522(h) specifically authorizes a Chapter 13 debtor to use avoidance and recovery powers to protect exemptions that are personal to the debtor.23 For example, in a Chapter 13 case proposing de minimis payment to unsecured claim holders, the court denied a debtor use of the § 544 strong-arm power to overcome an unrecorded mortgage.24 Another court denied confirmation of a plan that proposed to use § 547 to avoid a lien on a car without paying the value of the car to creditors through the plan.25 When only the debtor will benefit from the recovery of a fraudulent conveyance, it has been held that § 548 is not available.26 To defeat an unperfected security interest or to recover or avoid prepetition transfers or conveyances, the Chapter 13 debtor may have to demonstrate either entitlement to an exemption or some benefit to creditors. The benefit to creditors may be demonstrated by enhancement in the percentage paid to unsecured claim holders either through immediate distribution of the recovered property or through an increase in the minimum percentage that must be paid to accomplish confirmation.

[10]

When the fruits of an avoidance action will only benefit the debtor—for example, when the property or value recovered can be exempted by the debtor—the debtor’s counsel who survives a standing attack may then face questions about recovering attorney fees. For example, in Quisenberry v. American State Bank (In re Quisenberry),27 the debtor sought to avoid the setoff of a checking account in an adversary proceeding under §§ 542,28 553(b)29 and 547(b).30 The bankruptcy court concluded that to the extent the debtor was protecting an exemption under § 522(h), the debtor had standing to avoid the setoff. But with respect to the debtor’s attorney’s request for compensation, the bankruptcy court found a lack of benefit to creditors: “Debtor’s attorney’s prosecution of this adversary resulted in no benefit to the estate. In effect, this adversary constituted nothing more than a preservation of Debtor’s exemption. As such, the court denies allowance of Debtor’s attorney’s requested compensation.”31

[11]

The outcome in Quisenberry was certainly good for the debtor but perhaps unnecessarily harsh for debtor’s counsel. As discussed in detail elsewhere,32 11 U.S.C. § 330(a)(4)(B) provides in a Chapter 13 case “the court may allow reasonable compensation to the debtor’s attorney for representing the interests of the debtor in connection with the bankruptcy case based on a consideration of the benefit and necessity of such services to the debtor.” The “benefit to the estate” standard applied in Quisenberry to deny compensation for the successful avoidance action without consideration of the obvious benefit to the debtor of creating and preserving an exemption is inconsistent with § 330(a)(4)(B).

[12]

One court found a narrow back door for Chapter 13 debtors to challenge security interests even when the collateral cannot be exempted after it is freed from a creditor’s grasp. In In re Reese,33 the debtors objected to secured proofs of claim filed by a bank based on home improvement contracts. One of the debtors purchased and installed a new roof; the other purchased and installed vinyl windows. The court found that the bank had not perfected its security interests and that the security interests were avoidable by a trustee under § 544. However, as between the debtors and the bank, the security interests were enforceable under the Uniform Commercial Code. Citing In re Wilkinson,34 the court concluded that “the security interest of the bank, although unperfected and avoidable by the trustee, could not be avoided by the respective debtors in these cases.”35 Finding this result unsatisfactory, the court turned to state law and determined that when the roof and vinyl windows were incorporated into the debtors’ homes, the goods “passed from being ‘pure personalty’ to ‘pure realty.’ . . . [T]hey were incorporated into the respective dwellings in the nature of ordinary building materials and, as such, completely lost their chattel character.”36 Under state law, the bank could not remove the goods, and “for these reasons” the bank’s claims were rendered unsecured.

[13]

Reese gives a strong scent of the right outcome, but it is not altogether clear how the debtors overcame the bank’s security interests without the use of an avoidance power. Reese would clarify had the Chapter 13 trustee joined in the claims objections.37

[14]

Or perhaps Reese was on the same track as the bankruptcy court in GAF Linden Employees Federal Credit Union v. Robertson (In re Robertson).38 In Robertson, a car lender with an unperfected security interest brought an adversary proceeding to determine the extent and priority of its lien. The debtor responded on summary judgment that the lender’s unperfected security interest was an unsecured claim in the Chapter 13 case. The bankruptcy court acknowledged that the debtor could not avoid the unperfected security interest under § 544 because the lien was consensual; but the court found in § 9-301 of the Uniform Commercial Code a power akin to § 544 that could be used by the Chapter 13 debtor:

The trustee in bankruptcy may avoid an unperfected security interest pursuant to 11 U.S.C. § 544(a) by, in effect, standing in the shoes of the hypothetical judicial lien creditor. However, Section 9-301 of the UCC goes farther than the familiar principle just stated. The definition of “lien creditor” as used in Section 9-301(1)(b) includes specifically a trustee in bankruptcy. . . . Thus, as to the trustee in bankruptcy, the UCC makes the lien rights of the holder of an unperfected security interest subordinate to the rights of a trustee in bankruptcy, without any requirement to avoid the lien under the Bankruptcy Code. . . . In a Chapter 13 case, the same rights are afforded to the bankruptcy estate. That is, under Section 9-301(3) of the UCC, the lien of the unperfected security interest holder is subordinate to the rights of the bankruptcy estate in the collateral property. The claim is allowed solely as an unsecured claim for purposes of treatment in the Chapter 13 case. . . . Although the claim of the unperfected secured creditor is allowed as an unsecured claim against the estate in bankruptcy, the debtor may not exempt the collateral from the estate, free of the effect of the unperfected lien. Section 522(c)(2) of the Bankruptcy Code provides that property exempted remains liable for debts secured by liens which are not avoided under the avoidance provisions of the Bankruptcy Code. Although 11 U.S.C. § 522(h) provides that the debtor may exercise the trustee’s power to avoid a transfer of property that the debtor could exempt under 11 U.S.C. § 522(g)(1), the debtor may not avoid a voluntary transfer, including the consensual grant of a security interest (perfected or unperfected). 11 U.S.C. § 522(g)(1). Thus, the debtor in either Chapter 7 or Chapter 13 cannot avoid the consensual unperfected security interest for purposes of exercising an exemption free of the lien formed by the security interest. This restriction insures that the subordination provisions of Section 9-301 of the UCC enure to the benefit of the bankruptcy estate and that the effect of the lien remains valid as between the creditor and the debtor’s non-bankruptcy estate interests in the property. At the conclusion of the Chapter 13 case, where the debtor has paid the value of the property into the plan for distribution, the lien arising from the unperfected security interest is void pursuant to 11 U.S.C. § 506(d). . . . The end result of the interplay between the UCC and the Bankruptcy Code is that the value of the collateral must be delivered by the Chapter 13 debtor to the estate, as opposed to the unperfected secured creditor. If the value is delivered by the performance under a plan and the successful completion of the case, the debtor retains the collateral thereafter free of the lien. However, if the debtor retains the collateral without paying the value to the estate . . . the lien remains valid as between debtor and creditor.39
[15]

Robertson suggests that Chapter 13 debtors (and trustees) can “avoid” unperfected security interests without meeting the technical requirements of §§ 544(a) and 522(h) when the U.C.C. would give a trustee in bankruptcy priority over an unperfected lienholder. This could be big news for Chapter 13 debtors (and trustees) because this U.C.C.-based power is not limited to the protection of exemptions and might be exercisable without the expense and delay of an adversary proceeding. Although not altogether clear from the opinion, the debtor in Robertson could pay the value of the car to the trustee for distribution to unsecured claim holders, freeing the car of the lien in the process.

[16]

Under any circumstances, a Chapter 13 debtor’s exercise of avoidance powers is subject to the normal defenses and restrictions on a trustee’s powers to avoid transfers and conveyances.40 In Chapter 13 cases filed after October 22, 1994, debtors must commence an avoidance or recovery action within two years of the filing of the petition.41 Debtors with avoidance or recovery actions should be careful to preserve those actions in any proposed plan—confirmation of a plan that fails to preserve avoidance or recovery actions may preclude that litigation after confirmation.42 The Religious Liberty and Charitable Donation Protection Act of 199843 amended § 548 to preclude recovery of otherwise fraudulent conveyances to “qualified religious or charitable” entities.


 

1  See §§ 4.13 [ Fraudulent Conveyance or Preference Problems ] § 8.15  Fraudulent Conveyance or Preference Problems and 160.1 [ In General: Plan Payments vs. Hypothetical Liquidation ] § 90.1  In General: Plan Payments vs. Hypothetical Liquidation.

 

2  See 11 U.S.C. § 103(a).

 

3  See § 52.1 [ Turnover of Property ] § 50.1  Turnover of Property.

 

4  See 11 U.S.C. § 544(a) (“[T]he trustee . . . may avoid any transfer of property.”); 11 U.S.C. § 545 (“[T]he trustee may avoid the fixing of a statutory lien on property of the debtor.”); 11 U.S.C. § 547(b) (“[T]he trustee may avoid any transfer of an interest of a debtor in property.”); 11 U.S.C. § 548(a) (“[T]he trustee may avoid any transfer of an interest of the debtor in property.”).

 

5  See Hartford Underwriters Ins. Co. v. Union Planters Bank, 530 U.S. 1, 120 S. Ct. 1942, 147 L. Ed. 2d 1 (2000) (Only the trustee is authorized by § 506(c) to recover a surcharge for the expenses of preserving property subject to a lien.).

 

6  11 U.S.C. § 1203 provides:

Subject to such limitations as the court may prescribe, a debtor in possession shall have all the rights, other than the right to compensation under section 330, and powers, and shall perform all the functions and duties, except the duties specified in paragraphs (3) and (4) of section 1106(a), of a trustee serving in a case under chapter 11, includingn operating the debtor’s farm.

 

7  See In re Grant, 303 B.R. 205 (Bankr. D. Nev. 2003) (Debtor has standing under § 522(h) to avoid foreclosure sale under § 544, but recorded notice of default defeats any hypothetical status the debtor would assert under § 544.); Finance Factors, Ltd. v. Sagon (In re Sagon), Nos. 02-02950, 02-00071, 2003 WL 22945923, at *4 (Bankr. D. Haw. July  9, 2003) (unpublished) (Debtors can avoid mortgage inadvertently omitted from transfer certificate of title using strong-arm power in § 544(a)(3); standing issue is not reached because it would be “wasteful” given that trustee could clearly avoid the unrecorded interest. “The trustee is not a party to this case and has not taken steps to avoid the FF Mortgage. The debtors argue that they have standing to assert avoidance actions. I need not reach this issue. It would be wasteful to enter an order correcting [the transfer certificate of title] to reflect a lien that the trustee could avoid. The trustee would surely do so because the viability of the debtors’ Chapter 13 plan depends almost entirely upon whether Finance Factors’ claim is secured or unsecured.”); In re Steck, 298 B.R. 244 (Bankr. D.N.J. 2003) (Debtor has standing under § 522(h) to avoid a judicial lien under § 544, but complaint is barred by two-year limitations period in § 546(a).); Jakab v. Cendant Mortgage Corp. (In re Jakab), 293 B.R. 621 (Bankr. D. Vt. 2003) (Chapter 13 debtors and trustee as joint plaintiffs can void a mortgage under Vermont law when the real estate was owned by spouses as tenants by the entirety but only one spouse signed the mortgage.); Jackson v. Capital Asset Research Corp. (In re Jackson), 290 B.R. 527 (Bankr. M.D. Pa. 2003) (Debtor has standing under § 522(h) to avoid liens under § 544, but lien for water and sewer fees assigned to a corporation for collection is not avoidable.); In re Jay, No. 02-21010, 2002 WL 31941459 (Bankr. D. Idaho Dec. 31, 2002) (unpublished) (Applying Young v. Washington Federal Savings & Loan Ass’n (In re Young), 156 B.R. 282 (Bankr. D. Idaho 1993), debtors have standing under §§ 522(h) and 544 to avoid prepetition foreclosure sale, but cause of action fails because, applying Idaho’s race-notice recording statutes, BFP would not win when foreclosure sale took place before the petition notwithstanding that trustee’s deed was recorded after the petition.); Steder v. Surplus Prop., Inc. (In re Steder), Nos. 02 B 00173, 02 A 00229, 2002 WL 1729502 (Bankr. N.D. Ill. July 25, 2002) (unpublished) (In an action under §§ 547 and 548 to set aside a prepetition foreclosure sale, “[t]he Court concurs with the line of cases that allows Chapter 13 debtors to assert bankruptcy causes of action normally asserted by case trustees, including avoidance actions like the complaint at bar.”); Martin v. USDA Rural Hous. Serv. (In re Martin), 276 B.R. 552 (Bankr. N.D. Miss. 2001) (Chapter 13 debtor has standing under § 522(h) and § 544(a)(3) to avoid a prepetition foreclosure sale, but recording of notice of sale before the petition defeats the debtor’s complaint.); Eubanks v. Personal Fin. Co. (In re Eubanks), 2001 WL 1159140, at *3 (Bankr. S.D. Ill. Sept. 20, 2001) (opinion withdrawn) (Debtor can avoid unperfected lien, thus car lender is an unsecured creditor in the Chapter 13 plan. “[D]elivery of an incomplete application for title prior to the debtor’s bankruptcy filing was not sufficient to perfect Personal Finance’s lien on the debtor’s vehicle. . . . Personal Finance’s lien is unperfected and subject to avoidance by the debtor.”); In re Steiner, 251 B.R. 137 (Bankr. D. Ariz. 2000) (Chapter 13 debtor has standing under § 544 to challenge an unrecorded transfer to protect an exemption under § 522(h).); Lee v. Bank One, N.A. (In re Lee), 249 B.R. 864, 867 (Bankr. N.D. Ohio 2000) (Chapter 13 debtor can use avoidance powers to challenge the signature on a real estate mortgage lien but only to the extent necessary to protect the debtor’s exemptions under § 522(h).); In re Bonner, 206 B.R. 387, 388 (Bankr. E.D. Va. 1997) (Either the debtor or the trustee can exercise § 544 strong-arm power to defeat unperfected security interest of a car lender; debtor properly provided for the unperfected lien as an unsecured claim through the confirmed plan. “[A]t least one court in this district has held that a Chapter 13 debtor shares the trustee’s status as a hypothetical lien creditor under § 544. . . . Since either the trustee or the debtor is deemed to have exercised the hypothetical lien creditor’s rights at the time of filing, . . . the transfer of the security interest by the debtor to [the credit union] has been nullified . . . . The claim filed by [the credit union] is therefore unsecured.”); Frascatore v. Secretary of Hous. & Urban Dev. (In re Frascatore), 98 B.R. 710 (Bankr. E.D. Pa. 1989) (The debtors may stand in the shoes of the trustee and assert the trustee’s powers under § 544 to avoid fraudulent conveyances.); In re Ridgley, 81 B.R. 65 (Bankr. D. Or. 1987) (Debtor can exercise § 544 strong-arm powers to extent provided in § 522(h).); In re Chapman, 51 B.R. 663 (Bankr. D.D.C. 1985) (Debtor can exercise § 544 against unrecorded mortgage, but only for benefit of creditors.). Contra In re Binghi, 299 B.R. 300, 302–05 (Bankr. S.D.N.Y. 2003) (Chapter 13 debtor lacks standing to exercise strong-arm power in § 544(a)(3) against unperfected mortgage. “The plain language of Section 1303 is quite explicit and does not include the voidance powers under Chapter 5 of the Code. Nevertheless, a floor comment in the legislative history of Section 1303 suggests that this section ‘does not imply that the debtor does not also possess other powers concurrently with the trustee.’ 124 Cong. Rec. H 11106 (daily ed. Sept. 28, 1978) (remarks of Rep. Edwards); S17423 (daily ed. Oct. 6, 1978) (remarks of Sen. DeConcini). . . . [T]here are limited exceptions to the trustee’s exclusive avoidance powers under Section 522 . . . . [T]hat Congress included broad powers for both Chapter 11 and Chapter 12 debtors and failed to include such language for Chapter 13 debtors cannot be overlooked. . . . [P]ursuant to [Hartford Underwriters Insurance Co. v. Union Planters Bank, 530 U.S. 1, 120 S. Ct. 1942, 147 L. Ed. 2d 1 (2000)], the plain language of the statutes controls.”); Holcombe v. Debis Fin. Servs., Inc. (In re Holcombe), 284 B.R. 141, 143 (Bankr. N.D. Ala. 2001) (Debtor lacks standing to use the avoidance power in § 544 except in the limited circumstances described in § 522(h). This outcome is supported by Hartford Underwriters Insurance Co. v. Union Planters Bank, N.A., 530 U.S. 1, 120 S. Ct. 1942, 147 L. Ed. 2d 1 (2000). Also, “[t]he fact that Congress included broad powers for both Chapter 11 and Chapter 12 debtors and failed to include such language for Chapter 13 debtors cannot be overlooked.”); Trentman v. Meritech Mortgage Servs. (In re Trentman), 278 B.R. 133 (Bankr. N.D. Ohio 2002) (Chapter 13 debtors lack standing to avoid a mortgage under § 544(a)(3) because it was voluntarily granted and cannot be exempted by the debtors under § 522(h) and (g)(1).); Kildow v. EMC Mortgage Corp. (In re Kildow), 232 B.R. 686 (Bankr. S.D. Ohio 1999) (Debtor lacks standing to challenge unperfected mortgage under § 544 because mortgage was consensual.); Barclays American/Mortgage Corp. v. Wilkinson (In re Wilkinson), 186 B.R. 186, 191 (Bankr. D. Md. 1995) (Debtor does not have standing to bring an action under § 544 to defeat a defective mortgage because “[s]ection 544, which contains the ‘strong-arm’ avoidance power, is not included in the list set forth in section 1303. Therefore, a plain reading of section 1303 indicates that a Chapter 13 debtor does not have the authority to exercise the ‘strong-arm’ powers. In further support of this interpretation, 11 U.S.C. § 522(h) authorizes a debtor to avoid a transfer avoidable under § 544, only to the extent that the debtor could have exempted such property under § 522(g).” Mortgage company is entitled to have deed of trust “reformed” where only one debtor signed the deed of trust, but both debtors owned the underlying property. Notwithstanding reformation, deed of trust would be avoidable under § 544 because at the petition, the mortgage was signed by only one debtor and reformation during the Chapter 13 case cannot cure this defect.); In re Redditt, 146 B.R. 693 (Bankr. S.D. Miss. 1992) (Chapter 13 debtor does not have statutory authority to avoid materialman’s lien under § 544 or 545; § 1303 does not empower a Chapter 13 debtor to avoid a lien. There may be an exception where the debtor may exempt the property.); In re Perry, 131 B.R. 763, 769 (Bankr. D. Mass. 1991) (“[T]he plain meaning of § 1303 is that a Chapter 13 debtor has no § 544(a) powers.”); In re Tillery, 124 B.R. 127 (Bankr. M.D. Fla. 1991) (Receding from earlier decision in In re Hall, 26 B.R. 10 (Bankr. M.D. Fla. 1982), § 1303 does not grant Chapter 13 debtor avoidance power in § 544. There is no justification to allow a Chapter 13 debtor to avoid liens under § 544 because avoidance plays no meaningful role in debtor’s ability to propose a Chapter 13 plan. It was never contemplated that a Chapter 13 plan would be funded by the sale of property or from pursuing voidable transactions under § 544.); In re Carter, 2 B.R. 321 (Bankr. D. Colo. 1980) (Section 544 is not available to Chapter 13 debtor.).

 

8  See Poss v. Morris (In re Morris), 260 F.3d 654 (6th Cir. 2001) (Chapter 13 debtor’s preference action fails, not for lack of standing but because a constructive trust that arose in favor of creditor was effective more than 90 days before the petition.); Lee v. Schweiker, 739 F.2d 870 (3d Cir. 1984); Stewart v. Barry County Livestock Auction, Inc. (In re Stewart), 282 B.R. 871 (B.A.P. 8th Cir. 2002) (Use of cashier’s checks to cover dishonored personal checks in cattle transactions was neither a contemporaneous exchange nor the ordinary course of business in preference action by debtor and trustee.); Rambo v. Chase Manhattan Mortgage Corp. (In re Rambo), 297 B.R. 418 (Bankr. E.D. Pa. 2003) (Preference action to avoid foreclosure sale fails because of “greater percentage test” in § 547(b)(5); although BFP v. Resolution Trust Corp., 511 U.S. 531, 114 S. Ct. 1757, 128 L. Ed. 2d 556 (1994), does not insulate a foreclosure sale from preference recovery, Chapter 7 trustee would not sell property because commissions, taxes, professional fees and exemptions would exhaust value.);Quisenberry v. American State Bank (In re Quisenberry), 295 B.R. 855 (Bankr. N.D. Tex. 2003) (Chapter 13 debtor has standing under § 547(b) to avoid the setoff of a checking account to the extent of exemptions.); Norwest Bank Minn., N.A. v. Andrews (In re Andrews), 262 B.R. 299, 306 (Bankr. M.D. Pa. 2001) (Debtor has standing under § 522(h) to bring adversary proceeding to avoid sale under § 547; “a prepetition bankruptcy foreclosure sale can be avoided under the dictates of 11 U.S.C. § 547 when the secured claim of the foreclosing party is substantially less than the fair market value of the property.”); In re Johnson, 239 B.R. 416, 417–18 (Bankr. M.D. Ala. 1999) (Debtor and trustee can recover wages garnished within 90 days of filing notwithstanding that garnishment lien attached 10 months earlier. “Auto Acceptance relies upon [Askin Marine Co. v. Conner (In re Conner),] 733 F.2d 1560 (11th Cir. 1984) and two bankruptcy court cases which hold that a garnishment becomes a lien which cannot be bested by a creditor on a simple contract who acquires a judicial lien after the garnishment. Section 547(e)(1)(B). This is the co-called ‘continuing lien’ theory of wage garnishments. . . . The debtor/trustee relies upon [Freedom Group, Inc. v. Lapham-Hickey Steel Corp. (In re Freedom Group, Inc.),] 50 F.3d 408 (7th Cir. 1995) and numerous bankruptcy cases which conclude that Section 547(e)(3) requires a finding, under Federal law, that the garnished wages cannot be transferred until earned and payable to the debtor. . . . We cannot imagine a clearer statement of a point of Federal law. While the garnishment may be a state created lien right in property, if it results in a transfer under Federal law within the reach back period, it is subject to attack as a preference. No fiction of state garnishment law should be erected to defeat the purpose of the Federal statute.”); Smoot v. Swann Hill Condo. Unit Owners Ass’n, Inc. (In re Smoot), 237 B.R. 875, 877 (Bankr. D. Md. 1999) (Debtor can recover and exempt wages garnished during the 90 days before the petition that the trustee does not recover. Condominium Association garnished debtor’s paycheck eight times prior to the filing. It was undisputed that the Chapter 13 trustee could recover the funds garnished within 90 days under § 547(b). Creditor argued that the portion of wages it received were not available as an exemption under Maryland law and thus could not be recovered by the debtor under § 522(h). “[T]he avoidance powers of a Chapter 13 debtor are limited to those set out in § 522(h) of the code—that is, to recover potentially exempt property if the trustee fails to act. . . . Here what is being claimed as exempt by the Debtor is not the nonexempt portion of the wage attachment, but the preference proceeds recoverable by the Trustee that the Debtor could have claimed as exempt had the preferential transfer not occurred. The Bankruptcy Code allows the Debtor to seek these funds directly, because the Trustee has no interest in recovering preferential transfers that may then be claimed as exempt by the Debtor.”); Sucre v. MIC Leasing Corp. (In re Sucre), 226 B.R. 340, 347–48 (Bankr. S.D.N.Y. 1998) (Debtor cannot recover funds garnished during the 90 days before the filing of a Chapter 13 petition because, under Riddervold v. Saratoga Hosp. (In re Riddervold), 647 F.2d 342 (2d Cir. 1981), the debtor had no property interest in the garnished portion of her wages and thus there was no transfer of property for purposes of § 547(b).); Babiker v. Citizens Contracting Co. (In re Babiker), 180 B.R. 458 (Bankr. E.D. Va. 1995) (In an adversary proceeding by the debtor to avoid a judgment lien as a preference, stipulated values of assets demonstrate that the debtor was insolvent at the recording of the judgment lien. Lien is avoidable.); In re Toronto, 165 B.R. 746, 751 (Bankr. D. Conn. 1994) (“[C]ourts in this district have approved the use by chapter 13 debtors of the trustee’s power to avoid preferential transfers.” Debtor was permitted to avoid a prepetition judgment lien as a preference. However, avoidance of the judgment lien had the effect of rendering the debtor ineligible for Chapter 13 relief because unsecured debts then exceeded $100,000.); Taylor v. Mississippi Learning Inst. (In re Taylor), 151 B.R. 772, 775–79 (Bankr. N.D. Miss. 1993) (Debtors and Chapter 13 trustee together as plaintiffs are permitted to recover as preferences wages garnished during the 90 days before the petition, notwithstanding that the garnishment was executed outside the 90-day preference period. Funds garnished before the 90-day period are (by agreement) not recoverable. Funds garnished after the filing of the petition were seized in violation of the automatic stay and must be immediately turned over to the Chapter 13 trustee. With respect to the wages withheld during the 90-day preference period pursuant to a writ of garnishment served before 90 days before the petition, “§ 547(e)(3) must be considered. . . . Significantly, this section states that ‘for the purposes of this section, . . . a transfer is not made until the debtor has acquired rights in the property transferred.’ . . . [A] transfer of the debtor’s wages cannot occur until the debtor has actually acquired rights in the wages. . . . Those courts which have held that a writ of garnishment is a continuous binding lien on the debtor’s wages after the writ is served have overlooked the instructive assistance of § 547(c)(4) and § 547(c)(5). . . . [T]he garnishment of the debtor’s wages within the 90-day preference period is a series of preferential transfers that can be avoided and recovered for the benefit of the bankruptcy estate. . . . [T]hese funds shall be used by the trustee to fund the debtors’ plan for the benefit of all of the estate’s creditors.”); In re Bennett, 35 B.R. 357 (Bankr. N.D. Ill. 1984) (Debtor can maintain preference action under § 547.); Einoder v. Mount Greenwood Bank, 55 B.R. 319 (Bankr. N.D. Ill. 1985); Berry v. Pattison, 30 B.R. 36 (Bankr. E.D. Mich. 1983); Marsh v. First Nat’l Bank, 28 B.R. 270 (Bankr. S.D. Ohio 1983). Contra Wood v. Mize (In re Wood), 301 B.R. 558 (Bankr. W.D. Mo. 2003) (Chapter 13 debtor lacks standing under § 547 to avoid lien that attached to home a month before the petition; after substituting Chapter 13 trustee as party plaintiff and holding that the lien was avoidable by the trustee under § 547, the court “need not address” whether the debtor could avoid the lien under § 522(h).); Hacker v. Hodges (In re Hacker), 252 B.R. 221 (Bankr. M.D. Fla. 2000) (Debtor may lack standing to exercise the avoidance power in § 547.); Miller v. Brotherhood Credit Union (In re Miller), 251 B.R. 770 (Bankr. D. Mass. 2000) (Chapter 13 debtors do not have standing to avoid a preference under § 522(h) because the prepetition payment was voluntary, the debtors did not disclose the preference in their statement of financial affairs and the debtors did not claim an exemption in the payment. Chapter 13 debtors do not have standing to bring an avoidance action independent of § 522(h).); Cardillo v. Andover Bank (In re Cardillo), 169 B.R. 8, 11 (Bankr. D.N.H. 1994) (Chapter 13 debtor is without standing to bring a preference action to recover money seized from debtor’s bank account during the 90 days before the petition. “Nowhere in chapter 13 is a debtor given the powers of a trustee. Section 1303 of the Bankruptcy Code gives a debtor certain powers of a trustee under section 363 . . . but these only relate to the use, sale or lease of property. Although some courts have found that a chapter 13 debtor does have the avoiding powers, . . . this Court joins the significant and growing number of courts that have held, except to enhance the debtor’s exemptions under section 522, the chapter 5 avoiding powers of a trustee are not available to a chapter 13 debtor.”); Mast v. Borgess Med. Ctr. (In re Mast), 79 B.R. 981 (Bankr. W.D. Mich. 1987); Walls v. Appalachian Tire Prods., Inc., 17 B.R. 701 (Bankr. S.D. W. Va. 1982); Colandrea v. Colandrea, 17 B.R. 568 (Bankr. D. Md. 1982). See In re Jernigan, 130 B.R. 879 (Bankr. N.D. Okla. 1991) (Although Chapter 13 debtor probably can use § 547 to avoid preferences when debtor is acting on behalf of trustee, when debtor so acts, debtor is a fiduciary and must act for benefit of entire bankruptcy estate. Court denied confirmation of debtor’s proposal to use § 547 to avoid a lien on a car when value of car was not then to be contributed to make distributions under plan.).

 

9  See Grissom v. Johnson (In re Grissom), 955 F.2d 1440, 1449 (11th Cir. 1992) (In an adversary proceeding by Chapter 13 debtors to upset a prepetition foreclosure sale as a fraudulent conveyance, Eleventh Circuit holds that “‘[Durrett v. Washington Nat’l Ins. Co., 621 F.2d 201 (5th Cir. 1980),] 70% dictum provided an easy way for trial courts to determine reasonable equivalency. However, no longer should it be mistaken as the law of this circuit. The only proper way to determine reasonable equivalency under Section 548 is to conduct a thorough inquiry of all relevant facts and circumstances.”); Barrett v. Commonwealth Fed. Sav. & Loan (In re Barrett), 939 F.2d 20 (3d Cir. 1991) (In [Durrett v. Washington Nat’l Ins. Co., 621 F.2d 201 (5th Cir. 1980)]-style action to upset foreclosure sale, foreclosure sale of Chapter 13 debtor’s residence was not fraudulent conveyance when property brought 69.5% of value.); Harris v. Consolidated Bank & Trust Co. (In re Harris), No. 02-67845-T, 2002 WL 32152134 (E.D. Va. Dec. 27, 2002) (unpublished) (Debtor’s complaint to avoid foreclosure sale as a fraudulent conveyance fails because sale was properly conducted under Virginia law and debtor failed to prove that less than reasonably equivalent value was given.); Martin v. North Penn Sav. & Loan (In re Martin), 253 B.R. 346 (M.D. Pa. 2000) (Postpetition foreclosure sale was not a fraudulent conveyance because debtor raised and lost the issue of the adequacy of consideration in a state court proceeding to set aside the sheriff’s sale.); Annis v. First State Bank of Joplin, 96 B.R. 917 (W.D. Mo. 1988); Bundles v. Baker (In re Bundles), 78 B.R. 203 (S.D. Ind. 1987); Willis v. Borg Warner Acceptance Corp., 48 B.R. 295 (S.D. Tex. 1985); Montoya v. Boyd (In re Montoya), 285 B.R. 490, 493 (Bankr. D.N.M. 2002) (Debtor lacks standing to avoid mortgage as a fraudulent conveyance because, even if mortgage to secure attorneys fees was not voluntary, “the trustee has not sought to avoid the mortgage [sic], and property at issue is not property [the debtor] would otherwise be entitled to claim as exempt.”); Bell v. Instant Car Title Loans (In re Bell), 279 B.R. 890, 898 (Bankr. N.D. Ga. 2002) (Either Chapter 13 debtor or trustee has standing to assert fraudulent conveyance action against pawnbroker. “Arguably, all of the elements for success on the § 548 claim are present here. . . . [A]n involuntary transfer . . . took place within one year before the filing of the Chapter 13 petition. . . . A vehicle worth $10,000 [in the pawnbroker’s estimation] is not reasonably equivalent in value to an obligation of $5,300. . . . Debtor’s schedules . . . could demonstrate that she was, and is, insolvent. . . . If such findings were made, it would follow that the transfer of the vehicle to Pawnbroker is avoidable as a fraudulent transfer under § 548(a)(1)(B).”); Ryker v. Current (In re Ryker), 272 B.R. 602 (Bankr. D.N.J. 2002) (Applying BFP v. Resolution Trust Corp., 511 U.S. 531, 114 S. Ct. 1757, 128 L. Ed. 2d 556 (1994), debtor’s complaint to avoid foreclosure sale under § 548 is sustained because inaccurate notice of amount of debt resulted in inadequate sale price.), rev’d and remanded, 301 B.R. 156 (D.N.J. 2003) (Bankruptcy court must first determine whether Chapter 13 debtor has standing to avoid foreclosure sale in light of Hartford Underwriters Insurance Co. v. Union Planters Bank, N.A., 530 U.S. 1, 120 S. Ct. 1942, 147 L. Ed. 2d 1 (2000); if debtor has standing, mortgage holder’s failure to accurately state amount of its lien in the foreclosure notice forfeits the protection of BFP v. Resolution Trust Corp., 511 U.S. 531, 114 S. Ct. 1757, 128 L. Ed. 2d 556 (1994).); Talbot v. Federal Home Loan Mortgage Corp. (In re Talbot), 254 B.R. 63 (Bankr. D. Conn. 2000) (Chapter 13 debtors have standing under §§ 522(h) and 522(g)(1) to avoid a prepetition foreclosure judgment as a fraudulent conveyance under § 548 because the debtors claimed an exemption in the real property; however, judgment of strict foreclosure under Connecticut law conclusively established reasonably equivalent value under BFP v. Resolution Trust Corp., 511 U.S. 531, 114 S. Ct. 1757, 128 L. Ed. 2d 556 (1994).); In re Fitzgerald, 237 B.R. 252, 266–67 (Bankr. D. Conn. 1999) (Debtor’s § 548 action to upset judgment of strict foreclosure has sufficient merit that relief from the stay is denied to mortgage holder pending resolution of adversary proceeding. Mortgage holder acquired real property appraised at $157,000 pursuant to judgment of strict foreclosure in satisfaction of $135,000 mortgage debt. “[T]he court concludes that the Connecticut strict foreclosure procedure . . . is ‘sufficiently dissimilar from mortgage foreclosure by sale that [BFP v. Resolution Trust Corp., 511 U.S. 531, 114 S. Ct. 1757, 128 L. Ed. 2d 556 (1994)] does not apply.’ . . . Neither judicial oversight nor the technical ability of the mortgagor to elect a foreclosure by sale in lieu of strict foreclosure makes up for the absence of an actual public foreclosure sale. . . . Based upon FNMA’s own appraisal, the Debtor had approximately $20,000 in equity in the Property at the time of foreclosure. Twenty thousand dollars represents about 13% of the value stated in the Appraisal. . . . [T]he subject transfer was involuntary rather than voluntary. . . . [I]n absolute terms, $20,000 is not an insignificant amount. That amount might be deemed more significant in the context of this consumer bankruptcy case. . . . [T]he court concludes that there are ‘sufficiently serious questions going to the merits’ of the [reasonably equivalent value] issue to deny the motion [for relief from the stay].”); Washington v. King William (In re Washington), 232 B.R. 340, 344 (Bankr. E.D. Va. 1999) (BFP v. Resolution Trust Corp., 511 U.S. 531, 114 S. Ct. 1757, 128 L. Ed. 2d 556 (1994), precludes Chapter 13 debtor’s § 548 attack on tax sale by State of Virginia. “[T]he standards for reasonably equivalent value developed by the Supreme Court in BFP apply with equal force in the context of a judicial tax sale conducted in accordance with Virginia law.”); In re Samaniego, 224 B.R. 154, 162 (Bankr. E.D. Wash. 1998) (Section 548 does not defeat prepetition tax sale purchaser because, applying BFP v. Resolution Trust Corp., 511 U.S. 531, 114 S. Ct. 1757, 128 L. Ed. 2d 556 (1994), “it is not clear that the tax foreclosure procedures applicable in this case are so significantly different as to justify a different treatment of these sales under § 548 than the Supreme Court approved in BFP for a deed of trust/mortgage foreclosure.”); Edry v. Rhode Island Hosp. Trust Nat’l Bank (In re Edry), 201 B.R. 604, 606, 607 (Bankr. D. Mass. 1996) (Without citation to § 548, on Chapter 13 debtor’s complaint, foreclosure sale is invalidated under Massachusetts law because bank did not “exercise good faith and . . . use reasonable diligence” in the conduct of a foreclosure sale. Property sold for $86,500, 45% of the $190,000 fair market value. Bank gave “only the bare notice required by statute.” Bank chose not to advertise in a “display ad” but only listed the property in the foreclosure notices.); Russell-Polk v. Bradley (In re Russell-Polk), 200 B.R. 218 (Bankr. E.D. Mo. 1996) (Chapter 13 debtor’s adversary proceeding under § 548 to recover residential property sold at a regularly conducted real property tax sale is defeated by BFP v. Resolution Trust Corp., 511 U.S. 531, 114 S. Ct. 1757, 128 L. Ed. 2d 556 (1994).); Golden v. Mercer County Tax Claim Bureau (In re Golden), 190 B.R. 52 (Bankr. W.D. Pa. 1995) (Rejects debtor’s fraudulent conveyance attack on a prepetition tax sale of real property. In light of BFP v. Resolution Trust Corp., 511 U.S. 531, 114 S. Ct. 1757, 128 L. Ed. 2d 556 (1994), a “regularly conducted tax sale” is protected from fraudulent conveyance attack. Applying Pennsylvania law, debtor lost all right of redemption and at the petition owned only bare legal title. Purchaser is entitled to stay relief to acquire legal title from the debtor.); Noone v. Cyr (In re Noone), 188 B.R. 710 (Bankr. D. Mass. 1995) (Chapter 13 debtors’ complaint to recover a fraudulent conveyance is without merit because neither Massachusetts law nor § 548 upsets public foreclosure sale by assignee of the mortgagee. Citing BFP v. Resolution Trust Corp., 511 U.S. 531, 114 S. Ct. 1757, 128 L. Ed. 2d 556 (1994), debtors failed to present any evidence that auction of debtors’ residence was collusive or otherwise not commercially reasonable.); Reece v. Scharf (In re Reece), 117 B.R. 480 (Bankr. E.D. Mo. 1990) (“In the absence of an action by the trustee, a Chapter 13 debtor enjoys standing to prosecute an adversary complaint to avoid a fraudulent transfer pursuant to § 548.”); Weisman v. Eastlake Dev. Co. (In re Weisman), 112 B.R. 138 (Bankr. W.D. Pa. 1990) (Section 548 is available to Chapter 13 debtor under appropriate circumstances to protect creditors from transfers of assets; however, an action to recover a fraudulent conveyance must benefit creditors, not just the debtor. When only the debtor will benefit from the recovery, § 548 is not available in a Chapter 13 case.); Brown v. Van Guard Holding Corp. (In re Brown), 104 B.R. 609 (Bankr. S.D.N.Y. 1989) (Durrett-style action); Ananko v. Harsanyi (In re Ananko), 89 B.R. 399 (Bankr. D.N.J. 1988) (Durrett-style action to upset a foreclosure sale); Robinson v. Taylor (In re Robinson), 80 B.R. 455 (Bankr. N.D. Ill. 1987); Jackson v. Security Fed. Sav. & Loan Ass’n (In re Jackson), 76 B.R. 597 (Bankr. N.D. Tex. 1987) (Chapter 13 debtor can maintain Durrett-style action to upset a foreclosure sale.); Pruitt v. Gramatan Investors Corp. (In re Pruitt), 72 B.R. 436 (Bankr. E.D.N.Y. 1987); Ottaviano v. Sorokin (In re Ottaviano), 68 B.R. 238 (Bankr. D. Conn. 1986); In re Ristich, 57 B.R. 568 (Bankr. N.D. Ill. 1986); Demusis v. Carr, 40 B.R. 1007 (Bankr. D. Conn. 1984); Bluford v. First Fidelity Mortgage Co., 40 B.R. 640 (Bankr. W.D. Mo. 1984); United Penn Bank v. Dudley, 38 B.R. 666 (Bankr. M.D. Pa. 1984); Federal Nat’l Mortgage Ass’n v. Wheeler, 34 B.R. 818 (Bankr. N.D. Ala. 1983); Coleman v. Home Sav. Ass’n, 21 B.R. 832 (Bankr. S.D. Tex. 1982).

 

10  Cable v. Ivy Tech State College (In re Cable), 200 F.3d 467, 471 (7th Cir. 1999) (In dicta, “Section 548 unequivocally limits the avoidance power to the trustee, and for good reason: . . . It would invite abuse to allow debtors to avoid transfers that the debtor knew at the time of transfer would work to the detriment of the creditors.”).

 

11  See Stangel v. United States (In re Stangel), 219 F.3d 498 (5th Cir. 2000) (Chapter 13 debtor lacks standing under § 545 to avoid a tax lien.); Jackson v. Capital Asset Research Corp. (In re Jackson), 290 B.R. 527 (Bankr. M.D. Pa. 2003) (Chapter 13 debtor has standing under § 522(h) to avoid liens under § 545; however, debtor cannot avoid municipal lien for water and sewer fees that was assigned to a corporation for collection.); Wethington v. United States (In re Wethington), 219 B.R. 529 (Bankr. D. Minn. 1997) (Chapter 13 debtor lacks standing to exercise the lien avoidance remedy in 11 U.S.C. § 545(2).); Skinner v. First Union Nat’l Bank (In re Skinner), 213 B.R. 335 (Bankr. W.D. Tenn. 1997) (Judicial lien that arose upon execution by the sheriff on the debtor’s truck was judicial lien, not statutory lien, and could not be avoided under § 545. Lien was partially avoidable to the extent it impaired exemption under § 522(f).); In re Lott, 196 B.R. 768, 776–77 (Bankr. W.D. Mich. 1996) (Debtor lacks standing to avoid statutory lien of a mechanic who repaired and had possessory lien in tractor at the filing of the Chapter 13 case. “[A] chapter 13 debtor does not have standing to exercise the trustee’s avoidance powers. . . . [A] Michigan artisan’s lien is not a statutory lien which falls within the parameters of § 545 of the Bankruptcy Code. . . . [A]n artisan’s lien does not first become effective when the Debtor becomes insolvent. Rather, the lien becomes effective upon completion of the work and it remains in effect so long as the artisan retains possession.”); In re Redditt, 146 B.R. 693 (Bankr. S.D. Miss. 1992) (Chapter 13 debtor does not have statutory authority to avoid materialman’s lien under § 544 or 545. Section 1303 does not empower the debtor to avoid liens. There may be an exception where the debtor may exempt the property.); In re Henderson, 133 B.R. 813 (Bankr. W.D. Tex. 1991) (Chapter 13 debtor does not have standing to assert the avoidance power granted to a trustee in § 545(2) to avoid statutory tax liens on nonexempt property. Chapter 13 debtors probably do have a limited power to avoid transfers under § 522(h) if the property could have been claimed as exempt but for the transfer. However, the powers granted in § 522(h) are limited by § 522(c)(2)(B) if a tax lien is involved. Exempt property remains liable for a tax lien under § 522(c)(2)(B) notwithstanding the power in § 522(h).). But see IRS v. Diperna, 195 B.R. 358 (E.D.N.C. 1996) (Assuming without deciding that a Chapter 13 debtor has standing to avoid statutory liens under § 545, in an action by the Chapter 13 trustee and the debtor to avoid tax liens on the debtor’s car and household goods pursuant to § 545(2) and 26 U.S.C. § 6323(b), bona fide purchaser status afforded trustees under § 545 is not the same as the special superpriority status afforded a “purchaser” of certain property from a taxpayer under 26 U.S.C. § 6323(b).).

 

12  See § 53.2 [ Postpetition Transfers ] § 50.7  Postpetition Transfers. See, e.g., In re Elam, 194 B.R. 412 (Bankr. E.D. Tex. 1996) (Debtor has standing under §§ 544 and 549 to avoid foreclosure on exempt homestead where foreclosure sale and delivery of deed took place the day before the petition, but trustee’s deed was not recorded until the day after the filing.); Matravers v. United States (In re Matravers), 149 B.R. 204, 207 (Bankr. D. Utah 1993) (Section 549 permits a Chapter 13 debtor to recover property obtained by the IRS through postpetition tax collection efforts. “Section 549 provides that the trustee may avoid an unauthorized post-petition transfer of property of the estate. 11 U.S.C. § 549. A chapter 13 debtor has standing to pursue an action under § 549. . . . Section 549(d)(1) requires that any turnover action be filed within two years of a post-petition transfer. Thus, any transfer to the IRS after [two years before the filing of the adversary proceeding] not consistent with the terms of the debtors’ chapter 13 plan for payments of pre-petition liabilities, must be set aside. This Court orders all such property to be returned to the debtors forthwith.”); Department of Pub. Welfare v. Johnson-Allen (In re Johnson-Allen), 69 B.R. 461 (Bankr. E.D. Pa. 1987), aff’d, 871 F.2d 421 (3d Cir. 1989), aff’d sub nom. Pennsylvania Dep’t of Pub. Welfare v. Davenport, 495 U.S. 552, 110 S. Ct. 2126, 109 L. Ed. 2d 588 (1990) (Criminal restitution payments by Chapter 13 debtor after filing of petition are postpetition transfers within the scope of § 549(a) and may be avoided by the debtor consistent with § 522(h) and (g)(1).).

 

13  Russo v. Ciavarella, 28 B.R. 823 (Bankr. S.D.N.Y. 1983).

 

14  Realty Portfolio, Inc. v. Hamilton (In re Hamilton), 125 F.3d 292 (5th Cir. 1997) (Chapter 13 debtor has strong-arm power in § 544 when debtor claims an exemption in real property and challenges an involuntary prepetition transfer that was not concealed and that the trustee did not attempt to avoid.); Montgomery v. Dennis Joslin Co., II, LLC (In re Montgomery), 262 B.R. 772 (B.A.P. 8th Cir. 2001) (At least to the extent of protecting exemptions under § 522(g) and (h), Chapter 13 debtor has standing to challenge a prepetition foreclosure sale under state law and under the avoidance provisions of Chapter 5 of the Bankruptcy Code.); In re Grant, 303 B.R. 205 (Bankr. D. Nev. 2003) (Debtor has standing under § 522(h) to avoid foreclosure sale under § 544, but recorded notice of default defeats § 544 action.); In re Binghi, 299 B.R. 300, 302 (Bankr. S.D.N.Y. 2003) (“[T]here are limited exceptions to the trustee’s exclusive avoidance powers under Section 522.”); In re Steck, 298 B.R. 244 (Bankr. D.N.J. 2003) (Debtor has standing under § 522(h) to avoid a judicial lien under § 544 to the extent of the debtor’s exemptions; although debtor has standing under § 522(h), complaint is barred by two-year limitations period in § 546(a).); Quisenberry v. American State Bank (In re Quisenberry), 295 B.R. 855, 863–64 (Bankr. N.D. Tex. 2003) (“[S]ection 522(h) provides that the debtor may ‘recover a setoff . . .’ if such transfer is avoidable by the trustee under section 547 or section 553, and if the trustee does not attempt to avoid such transfer. . . . Debtor has ‘standing under 11 U.S.C. § 522(h) to pursue this matter.’ . . . Section 522(h) grants the debtor standing to ‘recover a setoff to the extent that the debtor could have exempted such property.’ . . . Debtor may pursue a section 547(b) or 553(b) action to the extent only that she is able to exempt the recovery.”); Jackson v. Capital Asset Research Corp. (In re Jackson), 290 B.R. 527 (Bankr. M.D. Pa. 2003) (Chapter 13 debtor has standing under § 522(h) to avoid liens under §§ 544 and 545.); In re Jay, No. 02-21010, 2002 WL 31941459 (Bankr. D. Idaho Dec. 31, 2002) (unpublished) (Debtors have standing under §§ 522(h) and 544 to avoid prepetition foreclosure sale.); Montoya v. Boyd (In re Montoya), 285 B.R. 490, 493–94 (Bankr. D.N.M. 2002) (“[A] Chapter 13 debtor generally will not have standing to bring avoidance actions unless the debtor otherwise qualifies under 11 U.S.C. § 522(h), and the following circumstances are present: 1) the debtor’s transfer of property was involuntary; 2) the trustee did not attempt to avoid the transfer; 3) the debtor did not conceal the property; 4) the debtor seeks to exercise an avoidance power set out in 11 U.S.C. § 522(h); and the transferred property could have been exempted if the trustee had avoided the transfer under 11 U.S.C. § 522(g).”); Holcombe v. Debis Fin. Servs., Inc. (In re Holcombe), 284 B.R. 141 (Bankr. N.D. Ala. 2001) (Debtor lacks standing to use the avoidance powers in §§ 544 and 547 except in the limited circumstances described in § 522(h).); Bell v. Instant Car Title Loans (In re Bell), 279 B.R. 890, 898 n.7 (Bankr. N.D. Ga. 2002) (In a footnote, “[s]ection 522(h) provides a statutory exception to the doctrine that a chapter 13 debtor lacks standing to bring an avoidance action. Generally, it authorizes a debtor to pursue avoidance claims such as a § 548 fraudulent transfer action to recover involuntarily transferred property that the debtor claims as exempt if the bankruptcy trustee does not. . . . If the Debtor claims an exemption with regard to the vehicle, she has standing to seek its return under § 548.”); Trentman v. Meritech Mortgage Servs. (In re Trentman), 278 B.R. 133 (Bankr. N.D. Ohio 2002) (Chapter 13 debtors lack standing to avoid a mortgage under § 544(a)(3) because it was voluntarily granted for purposes of § 522(h) and (g)(1).); Martin v. USDA Rural Hous. Serv. (In re Martin), 276 B.R. 552 (Bankr. N.D. Miss. 2001) (Debtor has standing under § 522(h) to avoid a prepetition foreclosure sale under § 544(a)(3), but cause of action fails because of recording of notice of sale before the petition.); DeBarros v. National City Bank (In re DeBarros), 275 B.R. 251 (Bankr. D. Md. 2002) (Power to avoid a prepetition attachment lien as a preference is limited by § 522(j) to the amount of exemption available to the debtor.); Norwest Bank Minn., N.A. v. Andrews (In re Andrews), 262 B.R. 299 (Bankr. M.D. Pa. 2001) (Although debtor’s exemption in real property that was sold at foreclosure sale two days before petition is questionable, debtor has standing under § 522(h) to bring adversary proceeding to avoid sale under § 547.); Talbot v. Federal Home Loan Mortgage Corp. (In re Talbot), 254 B.R. 63 (Bankr. D. Conn. 2000) (Chapter 13 debtors have standing under §§ 522(h) and 522(g)(1) to avoid a prepetition foreclosure judgment as a fraudulent conveyance under § 548 because the debtors claimed an exemption in the real property.); Miller v. Brotherhood Credit Union (In re Miller), 251 B.R. 770 (Bankr. D. Mass. 2000) (Chapter 13 debtors do not have standing to avoid a preference under § 522(h) because the prepetition payment was voluntary, the debtors did not disclose the preference in their statement of financial affairs and the debtors did not claim an exemption in the payment. Chapter 13 debtors do not have standing to bring an avoidance action independent of § 522(h).); In re Steiner, 251 B.R. 137 (Bankr. D. Ariz. 2000) (Although Chapter 13 debtor has standing under § 544 to defeat an unrecorded transfer to protect an exemption under § 522(h), prepetition foreclosure sale divested the debtor of all interest in property notwithstanding that “ministerial act” of recording trustee’s deed came after the petition.); Lee v. Bank One, N.A. (In re Lee), 249 B.R. 864, 867 (Bankr. N.D. Ohio 2000) (“The Debtor, ineffectively, is attempting to utilize lien avoidance powers entrusted by the Congress to duly appointed case trustees. In limited circumstances, a Chapter 13 debtor may utilize such powers but only to the extent necessary to protect a debtor’s exemption entitlement. See, § 522(h).”); Smoot v. Swann Hill Condo. Unit Owners Ass’n, Inc. (In re Smoot), 237 B.R. 875, 877 (Bankr. D. Md. 1999) (“[T]he avoidance powers of a Chapter 13 debtor are limited to those set out in § 522(h) of the code—that is, to recover potentially exempt property if the trustee fails to act. . . . Here what is being claimed as exempt by the Debtor is not the nonexempt portion of the wage attachment, but the preference proceeds recoverable by the Trustee that the Debtor could have claimed as exempt had the preferential transfer not occurred. The Bankruptcy Code allows the Debtor to seek these funds directly, because the Trustee has no interest in recovering preferential transfers that may then be claimed as exempt by the Debtor.”); Carroll v. Manor Care of Largo, Inc. (In re Carroll), 237 B.R. 872 (Bankr. D. Md. 1999) (Judgment lien against husband only entered two weeks before petition cannot be avoided under §§ 547 and 522(h) because it did not attach to any present interest of the joint debtors and thus does not impair any exemption.); Kildow v. EMC Mortgage Corp. (In re Kildow), 232 B.R. 686, 691–93 (Bankr. S.D. Ohio 1999) (Debtor lacks standing to challenge unperfected mortgage under § 544 because mortgage was consensual. “[A] chapter 13 debtor who is able to show that the chapter 13 trustee has not acted to avoid a transfer pursuant to Bankruptcy Code sections enumerated in Section 522(h) may be able to pursue such avoidance, but only to the extent the debtor could have claimed an exemption pursuant to Section 522(g)(1). . . . A significant and growing number of courts have recognized that a chapter 13 debtor may avoid transfers, but only subject to the restrictions set forth in Sections 522(h) and (g)(1), i.e., only to the extent necessary to protect an exemption in property that the debtor has not concealed and where the lien sought to be avoided is involuntary. . . . Mr. Kildow cannot prevail, because he is unable to satisfy the first element of the test, which would require the liens he seeks to avoid to be involuntary.”); Braxton v. Bureau of Unemployment Compensation Benefits & Allowances (In re Braxton), 224 B.R. 564 (Bankr. W.D. Pa. 1998) (Chapter 13 debtor has standing under §§ 522(h) and 547 to avoid lien on residence that impairs exemption; however, lien of Bureau of Unemployment Compensation is a statutory lien that cannot be avoided under § 547.); Davis v. Victor Warren Properties, Inc. (In re Davis), 216 B.R. 898 (Bankr. N.D. Ga. 1997) (Chapter 13 debtor lacks standing to bring a fraudulent conveyance suit under § 548 but has limited authority under § 522 to avoid a foreclosure sale as a fraudulent conveyance to the extent the debtor can exempt the property. On summary judgment, foreclosing creditor’s public announcement at foreclosure sale with respect to bankruptcy was sufficient evidence of chilling or irregularity that debtor’s complaint would survive notwithstanding BFP v. Resolution Trust Corp., 511 U.S. 531, 114 S. Ct. 1757, 128 L. Ed. 2d 556 (1994). Debtor lacks standing to bring state law action to overturn foreclosure sale.); In re Brennan, 208 B.R. 448, 452–54 (Bankr. S.D. Ill. 1997) (“In the event the trustee does not act to avoid a lien on the debtor’s property, subsection 522(h) empowers the debtor to use the trustee’s avoiding powers to create equity for the estate that may be claimed as exempt by the debtor. The debtor, however, may avoid only liens that encumber property the debtor could have exempted under § 522(g)(1),—that is, only liens that were involuntarily imposed on property the debtor did not conceal. The debtor’s avoiding power under § 522(h), therefore, is limited and does not extend to the avoidance of security interests that were voluntarily granted . . . . If a debtor successfully avoids a lien under subsection (h), subsection 522(i)(1) allows the debtor to exempt the equity so recovered as though the trustee had avoided the lien. . . . [A]lthough the debtor’s avoiding capacity is limited to liens that were not voluntarily granted by the debtor . . . it could not be determined whether the liens were voluntarily imposed or, indeed, whether any liens existed at all, as the creditors failed to respond to the debtors’ complaints or to assert any defenses such as the debtors’ standing under § 522(h). The creditors’ defaults in each case resulted in the Court entering judgment avoiding their liens. Once the liens were avoided under § 522(h), the debtors became entitled to exempt the property so recovered pursuant to § 522(i) . . . . [I]f the trustee rather than the debtors had avoided these liens, the debtors could have exempted the recovered property to the extent it was personal property subject to a lien avoidable by the debtor under § 522(f)(1)(B).” Because the avoided liens became exemptions, the debtors were not required to increase payments into the plan to satisfy the best-interests-of-creditors test at confirmation.); In re Elam, 194 B.R. 412, 415–16 (Bankr. E.D. Tex. 1996) (“Generally, Chapter 13 debtors may not exercise the statutory avoiding powers, at least not without prior authorization of the Court obtained after notice and a hearing and upon a showing that the Chapter 13 Trustee has neglected or refused to prosecute the action. . . . However, there is a narrow exception to the general rule. Section 522(h) of the Code specifically grants a debtor standing to avoid certain involuntary transfers of exempt property. . . . The transfer involved here was the foreclosure of Debtor’s homestead. This clearly falls within the exception. Therefore, Debtor has standing to bring an avoidance action under sections 549 and 544. . . . Although the title transferred to Fisher on September 5, 1995, the Trustee’s Deed was not filed until September 7, 1995. Debtor filed her Chapter 13 petition on September 6, 1995. Thus, according to section 544(a)(3), Debtor stepped into the shoes of a hypothetical bona fide purchaser without notice on September 6, 1995. Thus, according to [Texas law], the September 5, 1995, conveyance was void as to Debtor because the trustee’s Deed had not yet been properly filed. Consequently, Debtor can avoid the transfer pursuant to section 544(a)(3).”); Callanan v. International Fidelity Ins. Co. (In re Callanan), 190 B.R. 137, 138–39 (Bankr. D. Mass. 1995) (Section 522(h) gives a Chapter 13 debtor standing to avoid a prepetition attachment that impairs an exemption. “Because of the limited power which 11 U.S.C. § 1303 provides to a Chapter 13 debtor, it would appear at a first reading that a debtor in Chapter 13 cannot avail him or herself of the provisions of 11 U.S.C. § 547. 11 U.S.C. § 522(h), however, provides as follows. . . . The Debtor claimed an exemption of $15,000 in his property pursuant to 11 U.S.C. § 522(d)(1). No objections to the Debtor’s exemption were filed. If the trustee had avoided the transfer, the Debtor would have been entitled to his claimed exemption. Having met the requirements of 11 U.S.C. § 522(h), the Debtor is entitled to bring this action .”); Cardillo v. Andover Bank (In re Cardillo), 169 B.R. 8, 11 (Bankr. D.N.H. 1994) (“[T]his Court joins the significant and growing number of courts that have held, except to enhance the debtor’s exemptions under section 522, the chapter 5 avoiding powers of a trustee are not available to a chapter 13 debtor.”); In re Redditt, 146 B.R. 693 (Bankr. S.D. Miss. 1992) (Section 1303 does not empower a Chapter 13 debtor to avoid a materialman’s lien under § 544 or 545 except if the debtor may exempt the property subject to the lien.); In re Henderson, 133 B.R. 813 (Bankr. W.D. Tex. 1991) (Chapter 13 debtor does not have standing to assert the avoidance power granted to a trustee in § 545(2) to avoid statutory tax liens on nonexempt property. Chapter 13 debtors probably do have a limited power to avoid transfers under § 522(h) if the property could have been claimed as exempt but for the transfer. However, the powers granted in § 522(h) are limited by § 522(c)(2)(B) if a tax lien is involved. Exempt property remains liable for a tax lien under § 522(c)(2)(B) notwithstanding the power in § 522(h).); In re Jernigan, 130 B.R. 879, 887 (Bankr. N.D. Okla. 1991) (“At least, it is apparent from §§ 522(g), (h), (i) that debtors may only use these avoiding powers for their own benefit as debtors within the narrow limits prescribed by that statute.”); Jardine v. Bennett’s Eastside Paint & Glass (In re Jardine), 120 B.R. 559, 562 (Bankr. D. Idaho 1990) (“[T]his court will not extend the Chapter 13 debtor’s powers beyond those provided in Section 522(h). . . . A Chapter 13 debtor does not have full unilateral avoidance powers except as to involuntary transfers of otherwise exempt property, and then only if the trustee has not acted.”); In re Williams, 109 B.R. 179 (Bankr. W.D.N.C. 1989); Bruce v. Republicbank–South Austin (In re Bruce), 96 B.R. 717 (Bankr. W.D. Tex. 1989) (Except in narrow situation in which § 522(h) is applicable, a Chapter 13 debtor does not have standing to pursue strong-arm avoidance actions.); Perry v. United States, 90 B.R. 565 (Bankr. S.D. Fla. 1988) (The only avoidance power available to a Chapter 13 debtor, § 522(h), is limited by § 522(c)(2)(B) such that a Chapter 13 debtor is prohibited from avoiding tax liens perfected against exempt property.); In re Ridgley, 81 B.R. 65 (Bankr. D. Or. 1987) (Strong-arm powers are available under § 522(h) to extent debtor meets preconditions established by that section.); Pruitt v. Gramatan Investors Corp. (In re Pruitt), 72 B.R. 436 (Bankr. E.D.N.Y. 1987); In re Driscoll, 57 B.R. 322 (Bankr. W.D. Wis. 1986) (Chapter 13 debtor generally may not utilize trustee’s Chapter 5 avoiding powers except as specifically provided in § 522(h) and (g).).

 

15  Realty Portfolio, Inc. v. Hamilton (In re Hamilton), 125 F.3d 292, 297 (5th Cir. 1997). Accord Montoya v. Boyd (In re Montoya), 285 B.R. 490, 493–94 (Bankr. D.N.M. 2002) (“[A] Chapter 13 debtor generally will not have standing to bring avoidance actions unless the debtor otherwise qualifies under 11 U.S.C. § 522(h), and the following circumstances are present: 1) the debtor’s transfer of property was involuntary; 2) the trustee did not attempt to avoid the transfer; 3) the debtor did not conceal the property; 4) the debtor seeks to exercise an avoidance power set out in 11 U.S.C. § 522(h); and, the transferred property could have been exempted if the trustee had avoided the transfer under 11 U.S.C. § 522(g).”); Trentman v. Meritech Mortgage Servs. (In re Trentman), 278 B.R. 133, 135 (Bankr. N.D. Ohio 2002) (Section 522(h) and (g)(1) provide a Chapter 13 debtor with standing to avoid a transfer of property under § 544 if four conditions are met: (1) the bankruptcy trustee does not attempt to avoid the transfer; (2) the debtor could have exempted the property; (3) the debtor did not conceal the property; and (4) the debtor did not voluntarily transfer the property.”).

 

16  See §§ 160.1 [ In General: Plan Payments vs. Hypothetical Liquidation ] § 90.1  In General: Plan Payments vs. Hypothetical Liquidation and 161.1 [ Exemption Issues ] § 90.2  Exemption Issues.

 

17  11 U.S.C. § 547(c)(8) provides a defense to preference recovery if “in a case filed by an individual debtor whose debts are primarily consumer debts, the aggregate value of all property that constitutes or is affected by such transfer is less than $600.”

 

18  See Electric City Merchandise Co. v. Hailes (In re Hailes), 77 F.3d 873 (5th Cir. 1996) (For purposes of the preference defense in § 547(c)(8), it is appropriate to aggregate several small transfers to the same creditor.).

 

19  See § 52.2 [ Relief from Garnishments ] § 50.2  Relief from Garnishments.

 

20  See § 60.1 [ Avoidance and Recovery Powers ] § 53.12  Avoidance and Recovery Powers.

 

21  See § 8.15  Fraudulent Conveyance or Preference Problems and § 90.1  In General: Plan Payments vs. Hypothetical Liquidation

 

22  The disposable income test for confirmation in 11 U.S.C. § 1325(b) is discussed in § 91.1  In General and § 92.1  In General.

 

23  See below in this section.

 

24  In re Chapman, 51 B.R. 663 (Bankr. D.D.C. 1985).

 

25  In re Jernigan, 130 B.R. 879 (Bankr. N.D. Okla. 1991).

 

26  Weisman v. Eastlake Dev. Co. (In re Weisman), 112 B.R. 138 (Bankr. W.D. Pa. 1990). Accord Mock v. Hannet, Inc. (In re Mock), 197 B.R. 468 (Bankr. E.D. Pa. 1996) (Without determining whether avoidance powers are generally available to a Chapter 13 debtor, action against a purchaser of real property to avoid a fraudulent conveyance that would benefit only the debtor is not appropriate in a Chapter 13 case.).

 

27  295 B.R. 855 (Bankr. N.D. Tex. 2003).

 

28  See § 52.1 [ Turnover of Property ] § 50.1  Turnover of Property.

 

29  11 U.S.C. §  553(b) provides:

(1) Except with respect to a setoff of a kind described in section 362(b)(6), 362(b)(7), 362(b)(14), 365(h), 546(h), or 365(i)(2) of this title, if a creditor offsets a mutual debt owing to the debtor against a claim against the debtor on or within 90 days before the date of the filing of the petition, then the trustee may recover from such creditor the amount so offset to the extent that any insufficiency on the date of such setoff is less than the insufficiency on the later of—
(A) 90 days before the date of the filing of the petition; and
(B) the first date during the 90 days immediately preceding the date of the filing of the petition on which there is an insufficiency.
(2) In this subsection, “insufficiency” means amount, if any, by which a claim against the debtor exceeds a mutual debt owing to the debtor by the holder of such claim.

 

30  See above in this section.

 

31  295 B.R. at 865.

 

32  See § 294.1 [ Debtors’ Attorneys’ Fees ] § 136.6  Debtors’ Attorneys’ Fees before BAPCPA.

 

33  194 B.R. 782 (Bankr. D. Md. 1996).

 

34  186 B.R. 186 (Bankr. D. Md. 1995).

 

35  194 B.R. at 787.

 

36  194 B.R. at 793.

 

37  The trustee’s power to bring an avoidance action against the holder of an unperfected security interest under § 544 is not uncertain. See § 60.1 [ Avoidance and Recovery Powers ] § 53.12  Avoidance and Recovery Powers.

 

38  232 B.R. 846 (Bankr. D. Md. 1999).

 

39  232 B.R. at 850–53.

 

40  See, e.g., Poss v. Morris (In re Morris), 260 F.3d 654 (6th Cir. 2001) (The bankruptcy court should not have granted Chapter 13 debtor summary judgment in preference action because constructive trust arose in favor of creditor more than 90 days before the petition.); Harris v. Consolidated Bank & Trust Co. (In re Harris), No. 02-67845-T, 2002 WL 32152134 (E.D. Va. Dec. 27, 2002) (unpublished) (Debtor’s complaint to avoid foreclosure sale as a fraudulent conveyance fails because sale was properly conducted under Virginia law and debtor failed to prove that less than reasonably equivalent value was given.); Cottrell v. United States (In re Cottrell), 213 B.R. 33 (M.D. Ala. 1997) (Foreclosure sale day before Chapter 13 petition was not avoidable preference because secured claim holder did not receive more than it would have received upon abandonment of the property in a Chapter 7 case.); In re Grant, 303 B.R. 205 (Bankr. D. Nev. 2003) (Debtor cannot avoid foreclosure sale under § 544 because recorded notice of default defeats hypothetical status the debtor would assert under § 544.); Rambo v. Chase Manhattan Mortgage Corp. (In re Rambo), 297 B.R. 418 (Bankr. E.D. Pa. 2003) (Preference action to avoid foreclosure sale fails because of “greater percentage test” in § 547(b)(5); Chapter 7 trustee would not sell property because commissions, taxes, professional fees and exemptions would exhaust value.); Piper v. United States (In re Piper), 291 B.R. 20, 24 (Bankr. D. Mass. 2003) (Chapter 13 debtor cannot defeat a tax lien on exempt property because “the Bankruptcy Code makes clear that even an exempt asset remains liable for certain debts, including ‘a debt secured by a lien that is a tax lien, notice of which is properly filed.’ 11 U.S.C. § 522(c)(2)(B). . . . [Section] 522(c)(2)(B) overrides the § 522(h) lien-avoidance power where the lien in question is a tax lien.”); In re Jay, No. 02-21010, 2002 WL 31941459 (Bankr. D. Idaho Dec. 31, 2002) (unpublished) (Debtor’s action under § 544 to avoid prepetition foreclosure sale fails because, applying Idaho’s race-notice recording statutes, BFP would not win when foreclosure sale took place before the petition notwithstanding that trustee’s deed was recorded after the petition.); Martin v. USDA Rural Hous. Serv. (In re Martin), 276 B.R. 552 (Bankr. N.D. Miss. 2001) (Debtor’s § 544(a)(3) action to avoid a prepetition foreclosure sale fails because recording, of notice of sale before the petition would put a potential purchaser on inquiry notice; thus, there can be no hypothetical bona fide purchaser for purposes of § 544(a)(3).); Hemstreet v. Brostmeyer (In re Hemstreet), 258 B.R. 134 (Bankr. W.D. Pa. 2001) (Applying BFP v. Resolution Trust Corp., 511 U.S. 531, 114 S. Ct. 1757, 128 L. Ed. 2d 556 (1994), Chapter 13 debtor’s complaint to avoid a fraudulent transfer under § 544 and Pennsylvania law is dismissed because tax sale is deemed to be for reasonably equivalent value and is not subject to avoidance under the Pennsylvania Uniform Fraudulent Transfer Act.); In re Im, 256 B.R. 437 (Bankr. E.D. Pa. 2000) (Chapter 13 debtor is not entitled to turnover of payments tendered to state court because in a preference action against the landlord, the debtor could not satisfy the greater percentage test in § 547(b)—the landlord would be entitled to the payments as prompt cure of default.); Hacker v. Hodges (In re Hacker), 252 B.R. 221 (Bankr. M.D. Fla. 2000) (Chapter 13 debtor cannot avoid a judgment lien under § 547 because the lien was docketed as a writ of execution more than 90 days prior to the petition.); Carroll v. Manor Care of Largo, Inc. (In re Carroll), 237 B.R. 872 (Bankr. D. Md. 1999) (Judgment lien against husband only entered two weeks before petition cannot be avoided under §§ 547 and 522(h) because it did not attach to any present interest of the joint debtors and thus does not impair any exemption.); Campana v. Pilavis (In re Pilavis), 228 B.R. 808 (Bankr. D. Mass. 1999) (In fraudulent conveyance action against debtor and debtor’s wife, debtor’s wife does not have seventh amendment right to trial by jury because common law fraudulent conveyance action to recover real property was equitable.); In re Samaniego, 224 B.R. 154, 161 (Bankr. E.D. Wash. 1998) (Even if debtors have § 544 strong-arm powers in a Chapter 13 case, those powers are of no use in a battle with the purchaser at a tax sale because “[g]iven the constructive notice provided by the filing of the certificate of delinquency, it is clear that the Trustee relying on his powers as a hypothetical bona fide purchaser would take with notice of the rights of the purchasers of the tax sale and subject thereto.” Tax sale was conducted two weeks before petition, and tax sale deed was recorded two days after petition. Although recording of tax deed was void as a violation of the automatic stay, stay was annulled retroactively to validate the recording of the deed.); Forrest v. United States (In re Forrest), 220 B.R. 424, 426 (Bankr. W.D. Okla. 1997) (Tax lien perfected within the preference period is not avoidable by a Chapter 13 debtor because “[section] 522(c)(2)(B) prohibits the avoidance of a properly filed pre-petition tax lien on property claimed exempt by a debtor, even if the lien would otherwise be avoidable under § 522(h).”); Roberts v. United States (In re Roberts), 219 B.R. 573 (Bankr. D. Or. 1997) (Debtor cannot avoid IRS levy under § 547 because the IRS’s lien on social security benefits became effective two years before the filing of bankruptcy when notices of federal tax liens were filed.); Klemme v. Matthias (In re Klemme), 218 B.R. 906 (Bankr. N.D. Iowa 1997) (Because creditor has a lien for care of animals under Iowa law perfected by possession of the debtor’s horse, debtor is not entitled to possession by summary judgment in a complaint under § 544. Debtor must provide adequate protection of the possessory lienholder.); O’Brien v. Vermont (In re O’Brien), 216 B.R. 731 (Bankr. D. Vt. 1998) (Debtor’s preference attack on Vermont’s prejudgment attachment pursuant to an environmental remediation is not barred by Eleventh Amendment immunity, but bankruptcy court would exercise its discretion to allow the state to litigate in state court.); Skinner v. First Union Nat’l Bank (In re Skinner), 213 B.R. 335 (Bankr. W.D. Tenn. 1997) (Chapter 13 debtor cannot avoid judgment lien that arose upon execution by the sheriff before the petition because under Tennessee law, once the execution lien attached and the sheriff levied on the debtor’s truck, no other lien creditor could obtain priority.); In re King, 35 B.R. 530 (Bankr. N.D. Ga. 1983) (Section 549(c) limitation on a trustee’s avoiding powers limits a Chapter 13 debtor’s power to avoid a postpetition transfer of property.).

 

41  11 U.S.C. § 546(a)(1), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 216, 108 Stat. 4106 (1994). See, e.g., In re Steck, 298 B.R. 244, 249 (Bankr. D.N.J. 2003) (Although debtor has standing to avoid a judicial lien under § 544 to protect an exemption under § 522(h), the complaint is barred by two-year limitations period in § 546(a). “The use of the avoiding power under § 544(a)(1) is circumscribed by the time limitations contained in 11 U.S.C. § 546(a)(1). . . . Under § 546(a) a Chapter 13 trustee or a Chapter 13 debtor seeking to exercise the avoidance powers must commence such an action or proceeding no later than 2 years after the entry of the order of relief . . . . There is no language in Section 522(h) which relieves a debtor from complying with the time requirements contained in § 546. Similarly, § 546 contains no exception or different time requirement for a debtor who employs the trustee’s avoidance power pursuant to § 522(h).”).

 

42  See § 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors. See, e.g., Marlow v. Sweet Antiques (In re Marlow), 216 B.R. 975, 980–81 (Bankr. N.D. Ala. 1998) (Confirmation order and order allowing claims bar debtor’s postconfirmation preference action to avoid a prepetition judgment. Creditor recorded its judgment two months before Chapter 13 petition. Creditor filed a proof of claim asserting secured status. Confirmed plan provided payment for allowed secured claim holders. Chapter 13 trustee filed a motion to allow claims that listed the judgment creditor as a secured claim holder. Debtor did not object. Six months after the order allowing claims, debtor filed adversary proceeding to avoid the judgment lien as a preference. Distinguishing Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995), and citing Spartan Mills v. Bank of America Illinois, 112 F.3d 1251 (4th Cir. 1997), “Marlow knew about her preference claim when she filed her petition, scheduled the claim of Malornis without reserving the right to attack the validity of the claim postconfirmation, and failed to object to the claim within the time prescribed by the order allowing claims. The rights of the debtor and Malornis were established by the confirmation order and order allowing claims which were entered without objection or appeal. Marlow is now bound by the terms of her confirmed chapter 13 plan and the order allowing claims to provide for the claim of Malornis as a secured judgment lienholder in her case.”). Compare Hildebrand v. Hays Imports, Inc. (In re Johnson), 279 B.R. 218 (Bankr. M.D. Tenn. 2002) (Confirmation does not preclude trustee’s avoidance action when proof of claim filed after confirmation reveals an avoidable security interest.).

 

43  Pub. L. No. 105-183, 112 Stat. 512 (June 19, 1998).